ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release January 10, 2006 #06-03
E-mail: [email protected]

ACB STATEMENT ON PROPOSED GUIDANCE ON COMMERCIAL REAL ESTATE LOAN CONCENTRATIONS

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Robert R. Davis, executive vice president and managing director of government relations, America’s Community Bankers, on the proposed guidance on concentrations in commercial real estate lending issued today by the federal banking regulators:

Community bankers are as concerned about maintaining the safety and soundness of their institutions as are the regulators. However, the proposal’s establishment of arbitrary thresholds on when commercial real estate loan portfolios will be considered “concentrations,” while meant to be guidance, could well be viewed as a limit, by either the examiner or the banker, and therefore may inhibit lending that could have been done in a safe and sound manner.

ACB is particularly concerned that the proposal could potentially force a community bank with a portfolio of commercial real estate loans labeled “concentrated” to maintain capital levels that exceed those for well capitalized institutions, again ignoring the fact that they have sound underwriting and risk management procedures, and without fully considering the expertise and experience of the management team.

Regulatory reminders of the risk of different types of lending is helpful, but setting arbitrary thresholds or suggesting discretionary capital “cushions” for concentrations may prove counterproductive. ACB looks forward to coordinating with its members and filing a detailed comment letter on this lending area that is becoming an increasingly important business line to growing community banks.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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